Material factor defence

Labour & European Law ReviewWeekly Issue 35905 March 2014

Employers can defend equal pay claims if they can show that the difference in pay is because of a “material factor”. In Calmac Ferries Ltd v Wallace and anor, the Employment Appeal Tribunal (EAT) held that employers cannot apply to have a claim struck out if they have not established the reason for the difference in pay.

Basic facts

Two women port assistants at Largs ferry terminal brought equal pay claims under the equal terms provisions of the Equality Act 2010, comparing themselves with two outport clerks, one of whom was a man.

Calmac conceded that the women were doing “like work” to that of their comparators, but argued that the difference in pay was due to a genuine material factor, namely that port assistants and outport clerks historically had different duties and responsibilities and different pay arrangements.

Following a request for further information the women admitted their claim was not based on direct discrimination. This prompted the employer to ask for the claim to be struck out on the basis that the women could not sustain a claim of indirect discrimination as the available pool was too small for a tribunal to conclude that there was systematic disadvantage to women as a group; and the women had not identified a provision, criterion or practice.

Tribunal decision

The judge refused the application, holding instead that the burden was on Calmac to prove that the material factor they were relying on for the difference in pay was the real reason for the disparity, that it was significant and that it was not related to sex.

EAT decision

The starting point, said the EAT, was for the employer to show that the difference between the man’s pay and the woman’s pay was because of a material factor.

In this case, the judge correctly identified that the two women had not conceded the reason advanced by their employer. The claimants were entitled to rely on the Equality Act 2010 to ask Calmac to prove why a man was paid more than they were.

When there is a pay disparity (as here), employers have to provide an explanation for the difference, which involves looking at why the claimants were paid as they were, and, separately, why the comparator was paid what he was paid.

As it was not obvious why the port assistants received the pay they did, it was perfectly reasonable for them to argue that there was prima facie discrimination based on a difference of gender. That then put the onus on the employer to prove the reason.

As the claimants had not conceded that the reason was the one given by CalMac, nor that it was the cause of the difference in pay, the tribunal had not made an error of law in refusing the employer’s application to have the claim struck out.

Comment

This case helps make clear that evidence of sex discrimination is bound up with the reason for the difference in pay. What evidence the claimants might use to show sex discrimination depended on what the reason was.